Debate is set to resume in the Senate this week over the Government’s proposed legislation to change the R&D tax concession, although there is still opposition among some business and industry groups over the plan.
The move comes after the House of Representatives passed the bill last year, although the Government removed it from the Senate to focus on other legislation in November. At the time, innovation minister Kim Carr said the Coalition was using “deliberate filibustering” to prevent debate.
But it is also true many industry groups and experts believe there are changes needed to be made to the bill, including changes on how the “dominant purpose” test is applied.
It appears one major change is certain – Institute of Chartered Accountants tax counsel Yasser El-Ansary says it is now likely the legislation will not apply retrospectively.
“It is my understanding that it is highly unlikely the Government will push to have these laws apply retrospectively from July 1, 2010. I believe it is a big call for taxpayers to be expected to comply with those laws from that data that are still not in place.”
Some business groups have opposed the plan to make the laws apply retrospectively, saying it would be too expensive and confusing. Now, El-Ansary says their wish may come true.
“I think the very likely outcome will be that the Government picks a starting date of July 1, 2011, if the bill is passed in the next couple of months.”
The bill was passed by the House of Representatives after Carr dealt with independents in order to have the legislation approved. The current bill will see SMEs provided with a 45% refundable tax credit, while companies with turnover over $20 million will receive a 40% non-refundable credit.
But opposition still remains. The Australian Industry Group, along with Opposition innovation spokesperson Sophie Mirabella, believe the current legislation is too restrictive and will limit the number of businesses actually eligible for the credit.
Mirabella’s office this morning told SmartCompany that the Coalition would like the Government to make amendments to the bill.
“What the Government keeps doing is putting the issue onto the Parliamentary schedule, but never debate it, and playing this ridiculous game, saying it is being blocked by the Senate.”
“They need to clarify whether the proposals rules are retrospective,” the spokesman says.
The Australian Industry Group was contacted for comment this morning, but referred SmartCompany to its comments made last November.
Last year, AIG chef executive Heather Ridout said the dominant purpose test – which tests whether a business is actually eligible for the credit – needs to be changed, with the definition of “core research” requiring a change as well.
“Business expenditure on R&D is fundamental to national efforts to raise productivity and international competitiveness. On any measure the tax incentive supporting business R&D is high quality public investment. The bill should not be passed in its current form.”
In fact, a Senate inquiry into the bill recommended that businesses under $20 million be exempt from the test, and also recommended a working group be established to report on the impacts of the bill.
El-Ansary says it is these recommendations that are expected to be addressed in this week’s debate.
“The Government has been in quite extensive discussions and negotiations with all of the minor parties and independent senators about the new R&D policy that has been proposed.”
“What the Government has wanted to do is understand the issues raised by some of the critics of the bill, and that’s why they’ve been through this process. But they are certainly still committed to implementing the changes and want to put them in place ahead of the new financial year, or soon afterwards.”
Patrick Stafford is a freelance journalist and a former deputy editor of SmartCompany.
